TSP: Are You In The Money?

Monday - 8/15/2011, 2:00am EDT

Thanks in part to a generous financial match from their employer, Uncle Sam, federal and postal workers have socked away almost $10,000 more in their Thrift Savings Plan accounts than the average American has invested and earned in his or her 401k plan.

The average balance for feds investing in the TSP — their in-house version of a 401k plan — the average balance is up just over $13,000 from what it was in December 2009.

As of June 30, 2011, the average account balance for long-time civil servants under the older, and more generous, civil service retirement system (CSRS) was $81,875.95.

The same June snapshot of the TSP accounts of feds hired under the newer federal employees retirement system (FERS) shows they have an average account balance of $81,144.40.

In December, 2009 the average account balance for both groups was just over $68,000.

Members of the uniformed military services, who tend to be younger and paid less than federal civilian workers, have an average TSP account balance of $12,685.42.

Most American workers don't have the option of a 401k plan account. If they do, it is unusual for the employer to match contributions at the 5 percent level. Many, if not most, don't provide any match.

Retirement benefits of CSRS employees are computed under a more generous formula than FERS. But FERS employees are eligible for matching contributions from their agencies of up to 5 percent. That's the equivalent of a 5 percent tax-deferred pay raise, provided the investors put in at least 5 percent of their own money. Employees who don't invest in the TSP, the government equivalent of a 401k plan, still get a 1 percent contribution from the government.

Annuities of feds under the old CSRS system are figured on a more generous formula than used to determine FERS benefits. Because of that CSRS investors in the TSP don't get any government match. Military personnel also do not qualify for any matching TSP contributions because Congress setup the program that way, and Pentagon bean-counters have fought any improvements because of the higher cost to the government.

Averages, of course, are just that. More than 10,000 feds have TSP account balances ranging from $500,000 to just over $3 million. But if you've been investing the maximum since day one and you still don't have a huge account, don't blame yourself.

Most, if not all, of the TSP millionaires accumulated that money before they joined government. The majority of them were lawyers (now federal judges), or doctors, corporate executives who came into government or one of the many millionaires elected to Congress. Being smart people — or having the ability to marry well — they realize the TSP is overseen by the government, has the lowest administrative fees in the business and is the only 401k plan account that offers stocks, bonds and super-safe, never-have-a-bad-day Treasury securities in the G-fund.


NEARLY USELESS FACTOID

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